April 2017 Financial Update

Dear Conference, below for your information is an overview of the EPA financial data for the period through April 2017.

Church Giving Report

Schedule 1is the Church Giving Report. This report shows the amount of money that EPA has billed all of our churches and the amount of money that the Conference Office has received from all of our churches. The report is divided into three sections: Apportioned Funds (funds that support United Methodist Ministries), Billed Funds (funds that pay for church and clergy benefits and insurance), and Health Savings (funds used for missional church clergy benefits or withheld from clergy and lay paychecks for health benefits). (A description of each individual fund can be found by clicking the link to the Budget Narrative documents on the EPA website.)

Overall, EPA will bill $17.7 million to its churches in 2017, $11 million for benefits and insurance, and $6.7 million for Conference and Denomination ministries. Of this amount, the EPA churches paid $5.2 million to the Conference through April 2017, 29% of the total amount due for the year. This is a good start to the year, helping to fund our current bills, but it is $687 thousand short of the amount that we would have liked to collect for our billed funds through April. Fortunately, EPA started 2017 essentially in a breakeven position with all of its bills due to vendors paid in full so we have been able to manage this cash flow shortfall in the short-term, BUT EPA is not able to finance this deficit in the long-term. Meaning that somehow this will have to be paid for by our churches.

It’s important to remember that while EPA has covered its obligations that are due through April 2017, some of the cash that has been used is from payments toward obligations that are not due to be paid until the end of the year. The churches who have not been able to pay their bills through April are “borrowing” these funds from the paying churches; to pay the current medical insurance, property insurance, and workers compensation coverage. Hopefully, the churches who are behind in their payments will be able to catch up over the course of the year or take special actions to improve their situations through fundraisers, community initiatives, capital campaigns, property sales, and other stewardship initiatives.

So far in 2017, EPA has realized $231,000 of cash receipts from the sale of properties and the recovery of historical balances that were due on some of these properties. In 2016, EPA had to use funds from reserve draws ($1.2 million), from closed church/parsonage property sales ($600 thousand), and its CMF surplus ($300 thousand) to cover the $1.5 million owed to vendors at the beginning of 2016 and the $600 thousand shortfall in billed funds incurred during the year.

The Connectional Ministries Fund received $1.076 million, or 28% of the annual billed amount due through April 2017. On a straight-line basis, we would hope to receive 33% of the annual amount over a four-month period in order to reach our annual target. The gap between CMF funds billed and CMF funds received remained the same at a 5 percentage point GAP in April (33% – 28%) from a 5 percentage point gap in February (16% – 11%). This means that the Conference has continued on the same trend in collecting funds in 2017 that pay for its local EPA ministries.

Our Conference has to pay for the ministries that support our Methodist work and the insurance and benefits needed to keep our churches open. The CMF collections through April 2017 exceeded those from a year earlier by $116,000.

In the Billed Funds area, contributions toward Retired Clergy and Health Obligations was short of the amount billed by $80,000, and Property and Liability Insurance was short by $65,000. Clergy Group Insurance (medical) had a $40,000 deficit vs. the billed amount. While the cash shortfalls create a financial strain on the Conference, they actually improved from February 2017 as more churches started to pay their 2017 remittances on a monthly basis. It really is important for our churches to pay their billed funds regularly, on a monthly basis, so that the Conference can effectively invest in our local mission and ministry programs.

For 2017, we’ve jumped to 245 churches who have paid 33% (the total current amount due) or more toward their remittance statements (vs. 189 in February 2017), while the number of churches who have paid $0 toward their remittances through April 2017 fell to 28 from 43 in February. This is a great improvement and we hope that our churches will continue to make strides in starting and maintaining their 2017 remittance payments. Conference Leadership has asked me to publish the current year payment data, which we will do at the end of each quarter (Schedule 4). A list of all churches with the percentage of their 2016 remittance payments will be published in the Spring issue of the NewSpirit Digest.

Some churches are facing challenges and are working diligently with their District Superintendent and financial staff to create plans for the success and sustainability of their ministry. We wholly support these efforts and want to work with our membership to help these efforts succeed. We are committed to supporting faithful, vital, sustainable congregations. But please have regular dialogue with your District leadership and use the Conference programs and resources to support your ministry. Consider leasing/renting/downsizing facility alternatives for your congregation if your building is too expensive, big or old for your congregation to support. And Remember – if you reduce your congregation’s annual operating budget, a secondary benefit is that your apportionments could go down as well.

EPA Ministry Budget

Schedule 2 and Schedule 2 – Cost Centersshow the EPA Ministry Budget for 2017. In 2017, EPA has a Connectional Ministries Fund budget of $3.2 million to invest in our Conference ministry programs. As noted above, EPA churches contributed $1.7 million for CMF in through April 2017, $98 thousand above its seasonal target budget and $107 thousand above the amount collected in 2016. The ministries spent $990 thousand, which was $104 thousand below the expense budget, and was $86 thousand below the amount that the Conference collected, giving the CMF budget a positive cash flow so far this year. All four ministry areas covered by CMF were under budget as of the April report date. Thanks to all of the EPA ministry directors, the DCM, cabinet, and Bishop for carefully managing their spending in 2017. The Administration area is reporting $1 thousand over budget as expenses for Annual Conference are being made ahead of registration receipts. We expect this to correct itself as all registrations for Annual Conference are completed and funds received.

You may note that in the second column of this schedule, 2016 Actual Results, we are showing a surplus of $299,946 and $0 contribution to Resolution 2012-21 Pre-’82 Pension. Unfortunately, for the second year in a row, the Conference will not be able to transfer this amount to the Pre-’82 account at this time because of the lack of funds collected from churches that are not paying their remittances in full. The financial strain caused by non-paying churches over the past several years has affected the Conference’s ability to fund this commitment from 2016. Essentially these funds are being used to pay for the amounts not collected for property insurance, clergy medical insurance, and clergy retirement benefits. When the non-paying churches are able to reimburse the Conference (285 full-paying churches) for these insurance and benefits, the Conference office will transfer these funds into the Resolution 2012-21 accounts.

As is the practice with many non-profits, the EPA Conference uses a centralized cash management account to pay its bills (for the churches) in full and in a timely manner. We use a fund accounting system to track funds collected and funds disbursed. The EPA Conference also tracks balances due from churches who have not paid their bills in full. The cabinet and district leadership are pro-actively working with these churches to develop plans to pay the remittances and balances outstanding to the best of their ability. We appreciate our churches faithful effort to honor their obligations to their fellow EPA connectional churches.

Resolution 2012-21 and the Pre-82 Pension liability

The top section of Schedule 3shows the Conference Reserves as of April 30, 2017. The investment markets continued to hold onto their gains from 2016, which increased the balances in the Conference Reserve fund by $6 thousand to $543 thousand at 4/30/2017, up from $526 thousand at 1/31/2017 and the Board of Trustees Reserves to $252 thousand from $246 thousand as well. The Board of Pensions Reserves jumped by $29,000 to $3.821 million in April 2017.

The next section shows the data for our work on Resolution 2012-21 and the Pre-82 Pension liability. The most recent valuation from the GBOPHB (as of January 1, 2016) shows that EPA’s unfunded Pre-’82 pension liability is $7.9 million. While this amount is $1 million higher than the prior year, EPA made a $1.3 million payment toward this obligation in December 2016 and had approximately $3.4 million of additional investments from its Resolution 2012-21 capital-raising efforts. This effectively makes EPA’s “net” unfunded liability for its Pre-’82 pension liability $3.2 million as of 4/30/2017.

As of April 30, 2017, the Conference Budget Surplus investment account had a balance of $588 thousand, up $5 thousand from its investment position at the end of January. This is real money that the Conference has contributed into the account from expense cuts in its EPA ministry, finance and administrative areas.

Proceeds from Church Sales have come in below target with a total amount realized of only $298 thousand, BUT due to the recent good investment markets, this account value is up $9 thousand from $289 thousand at January 31, 2017. The Fulfilling Our Covenant Campaign has been successful, with $3.3 million collected and over $450 thousand returned to church campaigns. We are in the home stretch as we collect the last $600 thousand of the $3.9 million in outstanding pledges to successfully complete the campaign. We look forward to working with you to make this happen and remember – there is always time to make and fund new pledges!

Conclusion

In conclusion, April was a good month for the EPA Conference as the number of churches paying their 2017 remittances increased by 15 and those paying on schedule increased by 18 churches to 245. THANK YOU! This makes a real difference across the Conference at every level and in so many ways, in particular, so that we can focus more on our ministry.

Please Note – through April, 28 churches have paid $0 toward their apportionments and billed funds. While this is an improvement from February, it remains a high level of non-paying churches and puts pressure on the other churches in the Conference. Non-payment increases the cost of all remittance items for all churches in the Conference. The Billed Funds are part of your church’s operating budget; if the Conference doesn’t buy these coverages on a group basis, then each church would have to buy them individually.

Please try to do whatever you can to pay your remittances on a monthly basis during the year. Thank you for your faithful support and continued efforts to succeed in our mission.